Many investors look to the FTSE 100 for dividend stocks. Certainly, there are plenty of generous payers among the blue-chip giants. In addition, though, I like to keep an eye on dividend stocks in the mid-cap FTSE 250 index.
A good number of these operate in sectors that aren’t represented in the FTSE 100. I see them as a valuable source of further income diversification. With this in mind, here are three dividend stocks from the FTSE 250 index I’d be happy to buy today.
Primary Health Properties (LSE: PHP) will release its annual results on 18 February. Dividends for 2020 are set to total 5.9p per share. This would mark the company’s 24th consecutive year of dividend growth. Few dividend stocks have as impressive a record.
PHP focuses on primary health real estate. This is traditionally much less cyclical than other real estate sectors. The majority of its rental income is received directly or indirectly from government bodies in the UK and Ireland.
One potential high-impact risk for PHP would be a fundamental change in government policy on the funding of primary care. However, I think this risk is low, due to government recognition that using private finance to supplement public capital represents good value for money.
With a dividend yield of 4.1% at a share price of 145.2p, I reckon PHP’s shares also represent good value for money.
FTSE 250 dividend stock #2
Leading UK self-storage brand Big Yellow (LSE: BYG) hasn’t matched PHP’s record of consecutive annual dividend increases. However, it’s always paid a dividend since its maiden distribution in 2003. And overall growth has been strong.
The board’s policy is to distribute 80% of earnings. BYG’s business has been relatively resilient through the pandemic, and the interim dividend declared in November was just 0.6% lower than the prior year. City analysts are forecasting a broadly flat payout for the full year, giving a yield of 3.1% at a share price of 1,106p.
Competition is a key risk for BYG. However, I think the company’s scale, and focus on London, its commuter towns and large metropolitan cities, give it a competitive advantage. Barriers to entry are highest in these areas, due to competition for land and difficulty around obtaining planning consent.
Wind in its sails
Wind farm owner Greencoat UK Wind (LSE: UKW) is the UK’s largest listed renewable energy infrastructure stock. Acquisitions have enabled the company to achieve significant size and scale. It’s well placed to make further value-accretive acquisitions and further enhance returns for shareholders due to this competitive advantage over smaller peers.
Since its flotation in 2013, UKW has delivered on its policy of paying a dividend that increases in line with RPI inflation. Annual results are due for release later this month. It’s on track to pay its 2020 target dividend of 7.1p, giving a yield of 5.2% at a share price of 136.8p.
Valuations in the industry are based on a number of long-term assumptions. These include such things as government energy policy, and asset life and maintenance expenditure of wind turbines. There’s a risk these may prove over-optimistic, but it’s a risk I’m willing to accept, set against the reward of the generous dividend yield.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind and Primary Health Properties. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.